4. Life Insurance Policies : Types of Policies

Question 1

… issues very small face amounts. Premiums are paid weekly and collected by debit agents.

Answer 1

Industrial Life Insurance

Question 2

… is life insurance of commercial companies not issued on the weekly premium basis–includes temporary (term) and permanent (whole).

Answer 2

Ordinary Life Insurance

Question 3

… is insurance written for members of a group; coverage is provided to the members under a master contract–is underwritten as a whole and the benefits of this coverage is no evidence of insurability is required.

Answer 3

Group Life Insurance

Question 4

… gives you the greatest amount of coverage for a limited period of time. Term is cheap but it doesn’t carry any cash value. It provides a pure death protection since it pays out only if the insured dies during the policy term.

Answer 4

Term Life Insurance

Question 5

… has a level face amount and level premiums. It provides a fixed, low premium in exchange for coverage which lasts for a specific time period.

Answer 5

Level Premium Term

Question 6

… term life that provides an annually decreasing face amount over time with level premiums. Usually for mortgage protection, as the loan is paid down the coverage decreases.

Answer 6

Decreasing Term

Question 7

… typically purchased using a Decreasing Term Life Insurance with the term matching the length of the loan period and the decreasing insurance face value amount matched to the declining loan amount.

Answer 7

Credit Policies

Question 8

.. term life that provides an annually increasing face amount over time based on specific amounts or a percentage of the original face amount.

Answer 8

Increasing Term

Question 9

… term life that has a provision to allow policyowners to convert a term insurance policy into a permanent (whole) life policy without showing proof of insurability.

Answer 9

Convertible Term

Question 10

… term life that has a provision to allow the insured the right to continue term coverage after expiration of the initial policy without showing proof of insurability.

Answer 10

Renewable Term

Question 11

.. term life that has a provision to allow the insured to renew a policy annually while providing a level face value amount.

Answer 11

Annual Renewable Term

Question 12

… term life policy the covers children under their parent’s policy. Term riders can also allow an applicant to have access coverage by adding an additional term rider for them on the main policy.

Answer 12

Term Rider

Question 13

… a permanent whole life policy that provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at 100 years and normally has a level premium. The only difference in “types” is the way they are paid: all policies are capped at 100 years, fixed premium, and level benefit with cash value accumulation.

Answer 13

Whole Life Insurance

Question 14

… a whole life policy that have premiums payable throughout the insured’s lifetime and coverage continues until the insured’s death.

Answer 14

Whole Life Insurance - Straight Life

Question 15

… a whole life policy that has coverage on a contracted life policy until age 100 or death, whichever happens first. Even though the premium payments are curtailed to a certain period, the insurance protection extends until the insured’s death or age 100.

Answer 15

Whole Life Insurance - Limited Pay

Question 16

… a whole life policy where the premium stays fixed for the first 5 years and then increases in year 6 and remains level for the remainder of the policy.

Answer 16

Whole Life Insurance - Modified

Question 17

… a whole life policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. It doesn’t meet the 7-pay test and is considered over funded and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.

Answer 17

Whole Life Insurance - Modified Endowment Contract

Question 18

… a life insurance policy that promises to pay the face amount on the death of the first of 2 lives covered. Once the other dies, one would receive the entire benefit and would also no longer be insured.

Answer 18

Joint Life Policy

Question 19

… a life insurance policy that promises to pay the face amount on the death of the last of 2 lives covered.

Answer 19

Joint Survivor Life Policy

Question 20

.. a life insurance policy that pays a monthly income from the death of the insured to the end of a pre-selected period.

Answer 20

Family Maintenance Policy

Question 21

.. a life insurance policy that pays a monthly income from the death of the insured to a date specified starting from the date of the policy issued.

Answer 21

Family Income Policy

Question 22

… a life insurance policy which offers flexible premiums and / or face value amount. To do this, it combines both whole and term into a single policy. No dividends are awarded and adjusting the face value could require proof of insurability.

Answer 22

Adjustable Life Policy

Question 23

… a life insurance policy provides the most flexibility with mutable terms and death benefits. The investment gains usually goes to the face value.

Answer 23

Universal Life Policy

Question 24

… a life insurance policy that requires a FINRA and NASD securities registration before selling this policy contract. These policies are investment sensitive and the insured will assume risk. This policy has a fixed and level premium.

Answer 24

Variable Life Policy

Question 25

… a whole life insurance policy where the policyowner controls the investment of cash values and selects the timing and amount of premium payments, thus giving the best of both Variable Life and Universal Life. This too requires a FINRA and NASD securities registration before selling this policy contract.
… This policy includes a monthly mortality charge as well as self-directed investments

Answer 25

Variable Universal Whole Life (VUL)

Question 26

… combines life insurance and an investment of an equity index and links face value to an outside equity index.
… a large percentage of the premium is invested in fixed income securities and the remainder is tied to stock index. … cash value has a minimum rate of accumulation
… if gains from the index exceed the minimum return, cash value will reflect the index.

Answer 26

Equity Index Universal Life

Question 27

… the equity amount or savings accumulation in a whole life policy.

Answer 27

Cash Value

Question 28

… a contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the insured’s death before the end of the stated period.

Answer 28

Endowment Policy

Question 29

… a policy written on the lives of children who are within specified age limits and generally under parental control.

Answer 29

Juvenile Insurance

Question 30

… a policy that doesn’t require a medical exam and tends to be more expensive than medically underwritten policies. The insurer will average out everyone’s risk and charge accordingly.

Answer 30

Non-Medical Life Policy

Question 31

… a premium used in Universal Life policies. It doesn’t guarantee there will be adequate funds to maintain the policy to any time, especially to life.

Answer 31

Target Premium

Question 32

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Answer 32

Investor-Originated Life (IOLI)

Question 33

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Answer 33

Key Person Insurance